Having an original idea for a software application is one thing, having a market for your product or service is another. Market research is essential to evaluate if there is likely to be enough demand at a price that will yield a healthy profit to sustain and grow your startup.
Spend ten minutes a day and brainstorm the following questions:
Does anyone actually need your software application?
Established enterprise software or mobile applications that your solution is trying to address may already exist. How and why is your software better? Do you have unique features that companies or individuals need? Can you provide your software at a competitive price? Do you have a route to customers? Never underestimate the sticking power of a well-established product, no matter how archaic it may look. Agriculture may not be a sexy industry for most people, but where there’s muck, there’s money. Up until recently, 98% of dairy farmers in the USA were using a herd management application which would give any UX/UI designer nightmares. The companies’ software had literally cornered the market. Despite multiple startups developing and launching beautiful, user-friendly software with the features and functionality needed by farm management, they weren’t able to penetrate the market. Farmers were happy with what they had and for the most part, were reluctant to change. No matter how excited you or your hyper-enthusiastic Cincinnati startup might be, if you receive an underwhelming ‘So what?’ reaction to your software from prospective customers – you’ve got a battle ahead of you if you’re going to make a success of your startup
What’s the competitive landscape for your startup?
Identify the strengths, weaknesses, opportunities, and threats. Make sure you include direct competition but also indirect. Ask yourself, what mobile applications are already out there that have some of the functionality of your application but address a different industry or market? Remember competitors could also become customers of yours, partners, investors or possibly look to acquire your startup in the future. Look for companies that offer complimentary products or services. Take Cincinnati startup Dotloop for example. Dotloop provides a real estate transaction management solution. Back in 2015 Zillow Group acquired this Cincinnati startup for $108 million. Start off with high-level competitor analysis and build from there. As new products or services come on the market, update accordingly.
What’s the best market for your solution?
It’s vital that you think outside the box. Markets are so fragmented these days that it’s often a non-obvious one that pays off, so spend plenty of time searching for new opportunities. If you’re in a Cincinnati startup incubator, speak to your peers. You would be amazed at the wealth of expertise spanning a wide variety of industries contained within those walls. Make it a habit of spending the time to learn about your fellow incubators business, background, strengths, and weaknesses. Establish a relationship and ask for feedback. Take my word for it; if nothing else, those connections will open doors for you. However, make sure you reciprocate. You do not want to get a reputation for being a prick who takes, takes, takes and never gives back. The world is a small place.
How healthy is that market?
What’s it worth and is it moving up or down? Are there any technological or other changes looming that might affect its fortunes? Today’s episode of The Daily a podcast by The New York Times had an interview with a New York Taxi driver. The taxi driver bought his taxi license 20 years ago for $120,000. In 2013 NY Taxi licenses peaked at over one million dollars with an average valuation of $850,000. For this and many other drivers, the New York Taxi license was their retirement. Around this time, I came across a company who had developed an account management software application for corporate clients. They were off to a good start with customers including EMC (now Dell EMC). Enter UBER and the market gets completely disrupted. Anyone with transportation could enter the taxi market in NY, and the valuation of NY taxi licenses plummeted. Within two years that corporate taxi management software company went bust. The founders biggest regret was that he continued to pursue sales rather than innovate or seek other opportunities for the software.
What’s the easiest market to enter?
If you intend on marketing your application, go after low lying fruit. Get some sales to get cash in the door. Offer an introductory price on condition that the customer provides feedback on your application and gives you a reference that you can use with other prospects. There should be plenty of opportunity in Cincinnati for your software application so you might as well start on your front doorstep. Once you get some initial customers on board, it will enable you to test your application under commercial conditions which is a whole new ball game.
What is the price point for your software application?
Regardless of how brilliant you think your software is, your price must be competitive. As a general rule, it should be within the range set by competitors. If you’re selling a mobile app, make sure you identify how many downloads you must sell to generate a sustainable profit. Decide whether you are going to sell your application for a one-off fee or license its use on an annual, quarterly, monthly or weekly basis. If you can provide continuous updates or premium features, a subscription model may work well.
Identify the feature of your application that has the highest potential for success?
It may turn out that specific functionality in your product attracts a lot more attention than other features. If this is the case, no matter what you think or want to believe, if you can get a minimum viable product out the door – do it! As one of my former mentors, Dr. Joe Kelleher, reiterated time and time, “cash is king!” There are so many startups out there who are never satisfied with what they have and always need to do just one more thing before they can sell. If you can sell it, get up off your ass and sell it. When you have a stable, minimum viable product and the cash starts flowing, then you can work on new, exciting, weird and wonderful features. First and foremost, you have a responsibility to your shareholders. If they have invested their hard-earned cash into your startup, you have a responsibility to make sure they get a return.
Best of luck and remember, if you have any questions or need some guidance, feel free to reach out to me or any of the Zoozler team on (513) 384-9799.
Photo by Hust Wilson